Regulatory Considerations Flashcards
ERISA
Protects the interest of plan participants.
Imposes duties, standards, and prohibitions on plan fiduciaries, prohibited transactions and exemptions.
Fiduciary: one who renders investment advice for a fee or other compensation direct or indirect with respect to money or other property of such plan or has authority or responsibility to do so.
DOL
Defines Investment advice as:
-The value of or advisability of, investing in, or purchasing, or selling of securities or other property
-Whether the advisor, either directly or indirectly (alone or together with an affiliate) does either of the following
+ Has discretionary authority or control whether or not pursuant to an agreement, arrangement, or understanding, with respect to purchasing or selling securities of property for the plan
+ Regularly renders advice to the plan based on mutual agreement…written or otherwise, in which advise will serve as the primary basis for investment decisions with respect to the plan based on particular needs of the plan regarding such matters..policy strategy, overall portfolio compositions, diversification.
research or recommendations itself is not advice unless done pursuant to a mutual agreement
issue advisory oppinions
Fiduciary Liability Issues
fiduciary must act:
- solely in the interest of the plan participants and beneficiaries.
- for the exclusive purpose of providing benefits to participants and benes reasonable expenses
- care skill and prudence and diligence (prudent man rule)
- Diversifying Investments to minimize risk and losses.
Prohibited Transactions
Can’t deal with assets of the plan in fiduciaries own interest or for own account.
Anti kickback rule- can’t receive consideration for its own personal account from any party dealing with the plan in connection with a transaction involving plan assets
PBGC
control the operation of qualified plans
Benefits guaranteed DB and Cash Balance guarantees monthly benefit no lump sum adjusted annually only nonforfeitable benefits
Treasury Department
Interprets and administers the tax laws.
revenue procedures final
revenue rulings proposed
private letter rulings temporary
DB Terminations
voluntary by employer involuntary by PBGC only -plan isn't funded to legal standards -plan can't meet benefit payments -long run loss that will only get worse Distress termination: -bankruptcy liquidation -bankruptcy reorg -can prove to PBGC necessary to pay debts